- New research from EQ has found that 44% of retail investors have sold shares to help them through the cost-of-living crisis
- A third of investors (34%) have divested from ethical stocks in search of greater returns
- Investors aged 40 and under more likely to divest (43%) than those aged 41-75 (23%)
Nearly half of DIY investors have cashed in their investments to keep pace with the rapidly rising cost-of-living, new research from Equiniti (EQ) reveals.
A survey of 2,000 UK shareholders (part of the provider’s latest upcoming Shareholder Voice report) shows that 44% of investors have sold stocks as they “need the cash” to cope with soaring inflation and household bills.
Men (46%) were more likely than women (41%) to take this course of action, and mainly those aged 18-40 (56%), with older investors (41-75) less likely to sell.
The research also shows that a third (34%) of investors have switched out of ‘ethical’ stocks over the last 12 months in a bid to achieve better returns as a result of the cost-of-living crisis. Men again were more likely to adopt this approach (35% vs 32% of women). Younger investors (18–24-year-olds and 25–40-year-olds, both 43%) were also more likely to have divested, compared to older investors (41- 56 and 57-75, both 23%).
Thera Prins, CEO, UK Shareholder Services at EQ comments: “Investors typically look to invest with a long-term horizon to build wealth but the current economic environment means a lot of people are being forced to rip-up their plans. Inflation is at a 40-year high, which is putting immense pressure on household finances, therefore it’s no surprise that many people are looking to make up the shortfall by selling out of their investments.
“There is nothing wrong with that, but it’s important that investors who dip into their pots to cover bills think of how they are going to replace those funds when that financial pressure subsides. Ask any expert and they will say that the best strategy to build long-term wealth is leaving your money in the markets for the long-term, so the sooner you can replace any money you withdraw, the better.
“Looking at it from a listed company perspective, the worry now will be convincing shareholders not to divest any further, demonstrating their long-term value over providing a quick buck.”
The research comes as EQ is due to launch its annual Shareholder Voice report in October, outlining current retail investing habits in the UK and US. This year’s research found that UK investors traded less regularly than their US peers, with those aged 25-40 most active – and more so than they were a year ago. 2021 saw more weekly trades from those surveyed, but 2022 saw an uplift in buying and selling across the year, having an average of £36,655 invested. This compared to £32,911 in 2021.
Prins concluded: “Retail investing has boomed over the last two years, as people looked to overcome low to no interest rates and capitalise on a recovering market post COVID-19. However, this enthusiasm now seems to be waning as inflation carnivorously eats away at wages, savings and discretionary expenditure. While we may see a contraction, especially among younger investors who may no longer have the extra funds to invest in equities, this doesn’t mean the end. In fact, it seems Gen Z are now a force to be reckoned with, so once this cost-of-living crisis is over, we may well see more of an evolution of the retail investing landscape, and a continuation in younger, hungrier investors.”
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Notes to Editor:
EQ’s Shareholder Voice report is based on research conducted by alan. on behalf of EQ, with fieldwork by iResearch among 2,000 UK shareholders. Fieldwork for the report took place between 28 June – 20 July 2022.
About Equiniti (Equiniti Group)
Equiniti (EQ) is a leading international provider of shareholder, pension, remediation, and credit technology. With over 5,700 employees, it supports 37 million people in 120 countries. EQ’s purpose is to care for every customer and simplify every transaction, delivered with less of an impact on the environment.